National Insurance Practice

What is National Insurance?

National insurance refers to schemes established by the government for the alleviation of human suffering resulting in unemployment, sickness, invalidity, or old age.

The fund for sustaining the schemes is derived from contributions made by employed persons. Their employers and, in some countries such as Britain, the government.

However, national insurance in most cases is a contributory form of insurance against some human illegalities such as illness and unemployment, and eventually provided retirement pensions and societal benefit.

Origin of National Insurance

National insurance practice is a development of the twentieth century Germany under Bismarck pioneered soil insurance, followed by Britain, the Scandinavian countries, the united state of America, and other countries.

It involves the application of insurance principles to the basic human needs in circumstances of personal distress.

Different Between National Insurance and Commercial Insurance.

For clarity purposes, the difference between national insurance and commercial insurance can be seen below.

National Insurance:

• national insurance is designed, administered and supervised by government and is compulsory for those covered by the scheme, except where there is contracting out provision.
  
• In national insurance practice the relevant law state and specifies the catigories of people covered by it.
  
• The fund from which benefit are paid is contributed to employed person, their employers and some countries by government.
  
• In national insurance any already arised disputs are settled in tribunals
  
• Also in national insurance, the rate of contibution and benefit payable are ensured by the relevant laws setting up the scheme.

Commercial Insurance:

This class of insurance is basically profit-oriented, that is they are run with a profit motive.

1. Commercial insurance is effected as a matter of choice by a person or organization, except in a few instances of compulsory insurance.

2. Commercial insurance is a private contract between a person or organization and the insurance company concerned.

3. The sum assured is determined by the insured and the insurance company fixes the premium payable.

4. In commercial insurance, the insurance fund is a pool of premiums paid by policyholders out of which claims are paid.

5. In commercial insurance, disputes are settled by either negotiation, arbitration, or litigation.